I sold a property that I lived in from 9-99 to 6-04 then used as a rental, and sold it in may of 06.?

Question

Will I owe Capital Gains on this propery?

Answer 1

I pretty sure you will because of it being a rental. I don't really know. I know that in my experience that you'd have to live in that property when you sold it. I know that if you have a rental house and want to sell it you first have to live in for 2 years before selling it.

Answer 2

Since you lived in the property as your principal residence it is eligible for the exclusion. However since you used it as a rental, an amount equal to the depreciation allowed OR ALLOWABLE for the years it was a rental is taxed as ordinary income in the year of the sale. The balance of any gain is eligible for the exclusion.